Lemonds Corp. manufactures mountain bikes and distributes them through retail outlets in Oregon...

Lemonds Corp. manufactures mountain bikes and distributes them through retail outlets in

Oregon and Washington. Lemonds Corp. has declared the following annual dividends over a

$54,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative, 6% preferred stock, $20 par, and 40,000 shares of common stock,

$1 par.

Instructions

1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2003. Summarize the data in tabular form, using the following column headings:

Total Preferred Dividends Common Dividends

Year

Dividends

Total

Per Share

Total

Per Share

2003

$40,000

2004

18,000

2005

24,000

2006

27,000

2007

65,000

2008

54,000

2. Calculate the average annual dividend per share for each class of stock for the six-year period.

3. Assuming that the preferred stock was sold at par and common stock was sold at $8 at the beginning of the six-year period, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

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